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The Distillers Corn Oil Craze

What biodiesel producers should know before buying into the hype
By Ron Kotrba | May 01, 2013

Distillers corn oil (DCO) use for biodiesel nearly doubled in the U.S. from 2011 to 2012, jumping from around 40.5  million gallons in 2011 to 76 million gallons in 2012, still only a fraction of the 1 billion-plus gallons of biodiesel produced both years.

Biodiesel made from DCO has a better cloud point (CP) than yellow grease (YG) or used cooking oil (UCO) biodiesel. DCO biodiesel CP is about 27 degrees Fahrenheit; UCO biodiesel CP is around 36 degrees, and YG biodiesel CP is 43 degrees.

DCO typically trades at a slight discount to YG and generally follows YG pricing trends, says Kristof Reiter, founder and owner of feedstock trading and consulting firm Reiter Scientific. There are, however, vastly different qualities of DCO on the market that can bring higher or lower prices. According to Reiter’s calculations using pricing information from The Jacobsen, production margins for DCO in 2012 for a small biodiesel plant ( less than 2 MMgy) was around 49 cents per gallon, less than the margin of YG (Illinois pricing) at 65 cents per gallon. “I assumed both oils needed esterification, and the DCO required degumming,” Reiter says. “I also took into account feedstock transport, small producer overhead and brokering fees.”

Through the first quarter of this year, DCO and YG margins have become very similar, coming in at 53 and 56 cents per gallon, respectively. Reiter’s numbers are based on the assumption that the DCO prices reported by Jacobsen are for higher quality DCO material and that retroactive tax credits are not included as part of the assumed biodiesel production profit margins in 2012.

There is some speculation as to how much of the retroactive credit the average producer captured. “While B99 trades at exactly $1 per gallon less than B100 during years with tax credits, B99 didn’t trade exactly $1 cheaper during years of expired tax credits,” Reiter says. “Rather, the B99 price was somewhat hedged to split a possible retroactive credit so as to give a portion of the risk and benefit of a retro credit during that year to both the producer and distributor. Given this uncertainty, we decided it would be more insightful to calculate that the numbers don’t reflect ‘ultimate margins’ in 2012, when producers operated without a credit until retroactive credits were passed, but rather the ‘realtime’ margins attained. The data suggests that if IRS credits were passed on a longer-term basis, the net result would be less risk to producers and lower cost to consumers.”

Some biodiesel producers, such as 5 MMgy Walsh BioFuels, hold DCO processing as trade secrets and don’t wish to discuss them. Large producer Renewable Energy Group also wouldn’t share quantity and conversion nuances, but acknowledges 85 percent of its 2012 feedstock was nonsoybean  oil.

Jatrodiesel ran DCO six months straight last year, around 500,000 gallons, at its test facility in Dayton, Ohio. President Raj Mosali says for a 5 MMgy plant, margins for DCO priced at the YG index range from 90 cents to $1.50 per gallon. His figures include the $1 per gallon federal credit, 10 cents per gallon for the production tax credit, plus RIN prices, not considering state incentives. If ethanol producers chose to install biodiesel processing equipment onsite, their margins would be on the higher end. Jatrodiesel has built 15 biodiesel plants in the U.S. and now seeks partnerships with ethanol producers and renderers with captive feedstock to further boost revenues generated from DCO and similar products.

Jim Ringo, president of Poet Nutrition, a division of Poet LLC, the largest U.S. dry mill ethanol producer, says, “We are investigating [onsite biodiesel production], but the question has to be answered, ‘do we want to be in the biodiesel business at all?’” he says. “The economics are very different from ethanol. A biodiesel facility is a capital investment, so really first and foremost, the situation has to [evolve] to where we believe biodiesel economics and end markets are sustainable during the investment period.” Poet sells its Voila-branded DCO at a premium because its product is “cleaner,” having a maximum free fatty acid (FFA) content of 5 percent and max total MIU (moisture, insolubles and unsaponifiables) of 3 percent.

Marketer RPMG’s DCO contains 15 percent FFA max and a maximum 3 percent MIU. RPMG markets about 200 million pounds (27 million gallons) of DCO from 12 ethanol plants across the U.S. Sixty to 70 percent of RPMG’s DCO goes to biodiesel production.

Poet’s BPX (“cold cook”) fermentation approach uses lower processing temperatures, thus fewer FFAs are liberated. Ringo says once all of Poet’s plants are spinning, it will have capacity to produce about 500 million pounds (67 million gallons) of Voila. About 60 percent goes into the biodiesel industry with the other 40 percent selling into feed markets. Ringo says if every U.S. ethanol plant were spinning this year, total DCO availability would be around 2.6 billion pounds (347 million gallons) based on 4.5 billion bushels of corn expected for ethanol production, subtracting 500 million bushels for wet milling, using the industry average of 0.65 pounds of DCO per bushel. As technologies improve, expect that volume to grow.

Grain sorghum has an advanced biofuel pathway under RFS2 and producers like Poet are looking into using more. While the verdict is out on how this might affect biodiesel producers, Ringo says pilot trials haven’t shown a noticeable difference in oil quality. “At this point it’s probably more about customer perception and the regulatory process,” he says.

A major difference between DCO and UCO is UCO was a refined, bleached and deodorized food-grade product. This is why DCO is dark red and contains gums and waxes that otherwise are not present in biodiesel feedstock. “We have a tendency when working with products such as yellow grease to think FFAs are the whole story,” says Jon Van Gerpen, a renowned biodiesel researcher at the University of Idaho, “but that’s not really true with corn oil. You have a whole suite of additional compounds that are present and that can complicate the biodiesel process.” YG is a “far superior feedstock for biodiesel than corn oil,” Van Gerpen says. “It doesn’t have this sort of witch’s brew of contaminants.” He recommends frontend wax removal. “That usually involves a cooling operation to get waxes to crystallize, then filtration to remove the crystallized wax,” he says. Gums, at least those that are hydratable and were hydrated during fermentation, should come out with the waxes during chilling and filtration, but the nonhydratable gums might not get removed. “If you have nonhydratable gums, then you really need to use phosphoric or citric acid to hydrate them,” Van Gerpen says, adding that the acid injection would be done prior to chilling and filtration.

Jatrodiesel performed no additional frontend pretreatment on nonpremium DCO and saw no issues. Mosali says he doesn’t understand paying more for low-FFA material, unless a producer is not outfitted for higher FFA feedstock. “They might buy Poet’s corn oil and blend with soy to end up at 2.5 percent FFA or something, and make their equipment work,” he says, “but you won’t see anyone out there who has put in a frontend esterification unit paying a premium for low-FFA material.” Mosali continues, “Once we convert it to biodiesel, cold chill the product and take it through cold soak filtration, any unconverted gums will be captured at the very end,” he says. “Most of what we’ve seen is it all falls through in the glycerin phase. We know people put in filtration equipment on the frontend to get rid of waxes and gums. We didn’t do any of that, we just took it through our process and had no issues.”

Van Gerpen questions whether waxes would come out in the glycerin. “I don’t think they are polar compounds,” he says. “If they were polar, they would come out with absorbents. I think they’re going to stay in the biodiesel. The good news is, they might be more soluble in diesel fuel than they are in biodiesel, but I don’t have any data to prove that.”

Reiter says producers with existing sulfuric acid esterification processes coupled to resilient transesterification and water-wash processes are in a pretty good position to experiment with various grades of DCO. Running all the material through an acid esterification process on the frontend to convert FFAs to biodiesel will hydrolyze some of the gums. “And then in the transesterification phase you have the caustic environment and phase separation removing additional impurities, which is helping you,” he says. “On the flip side, processes like chilling and maturation are often incompatible with the goal of maintaining throughput, so sometimes it’s better to clean the oil first so the throughput of existing processes aren’t compromised, and costly backend filtration can be minimized.”

Reiter says to take varying DCO from multiple sources, a frontend process more equivalent to robust “unidegumming” or “modified physical refining” is essential. “Unidegumming and modified physical refining are processes that utilize acid pretreatment, caustic, temperature controls and resonance time to remove a significant amount of both gums and waxes,” he says. “In some cases, we can modify a facility’s existing process to make it more resilient without going to this extreme, but it really depends on how much wax and gum they’ll need to remove.”

Mosali cautions that water washing may create foaming, which may ultimately affect  heat exchanger performance. “You need to look at it from those sorts of angles,” he says. Dry washing may avoid this, and it could also help remove some of the color, as end users prefer lighter-colored B100. Heat also fades the color. “If you’re doing steam stripping and you get the oil hot, it backs off from that bright red color,” Van Gerpen says. A bleaching operation would obviously lighten the color too.

Reiter and others advise biodiesel producers to send samples of DCO to a lab where their process can be mimicked to determine what additional steps, if any, might be needed before commercial production.


Author: Ron Kotrba
Editor, Biodiesel Magazine
218-745-8347
rkotrba@bbiinternational.com

 

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